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The Perils of Pay Walls

It’s no secret that the newspaper and magazine industries are under a period of terrible financial stress, as I reported in my article, "Where Have All the Magazines Gone?" Since then, even more magazines and newspapers have ceased publication of their printed format, including Newsweek at the end of 2012. As print magazines and newspapers become less viable, the companies that run them face a vexing choice—rely on Internet advertising on an open site for funding or charge fees for access to a pay wall site that inherently limits the size of their audience. Inspired by the New York Times’ recent implementation of a pay wall, many news magazines are implementing or plan to implement pay walls, including the Washington Post. As consumers, many find the concept of formerly free sites implementing viewing restrictions on content frustrating and counterproductive to their desire to know what’s going on in the world. But does it even benefit the companies themselves in the long run? Financial magazines and Wall Street praise the Times’ pay wall as the future, but the overall history of success for pay wall news sites is considerably less hopeful than it may first appear.

The Downfall of Variety’s Pay Wall

Variety, the well-known magazine that focuses on news about the entertainment industry, adopted a pay wall in 2010. The magazine’s owners explained that the pay wall was necessary to preserve the quality of its reporting. Yet by the end of 2012, Variety had failed to gain an adequate online subscription base, and it was bought out by Deadline Hollywood owner Jay Penske, who removed the pay wall from Variety’s website. Many websites reported that Variety’s staff actually welcomed the end of the pay wall as it granted their articles a wider audience. But the more important question is, why did so few customers want to pay for Variety’s articles in the first place? A brief stop by IMDB reveals the answer: Variety could not compete with the dozens of other news sites offering news on the entertainment industry for free. Even when the pay wall was up, IMDB’s news section did not suffer from websites to link to for news, and many sites even benefitted from Variety’s pay wall as it offered them a chance to serve as a replacement for Variety on IMDB and Google searches for entertainment news. The lesson is clear: if news companies want to profit from a pay wall, they should make sure the information they offer is not available for free elsewhere.

The New York Times Pay Wall

The New York Times, one of the few truly “national” newspapers in the United States, implemented a pay wall in 2011. The number of subscribers it received surprised many media observers and caused a great deal of debate over a number of issues, including the age of the Times’ core audience and its level of tech proficiency, how much websites should charge, and how the pay wall could be circumvented. What was lost in the discussion of the Times’ success in attracting subscribers was that the pay wall hasn’t saved the newspaper from having to make further staff cuts. It appears that rather than “saving” the Times, the revenue from the pay wall has allowed it to stabilize its decline in revenue and staff better than it could have without the pay wall. But if pay walls cannot make up the lost revenue from print ads, how can the Times sustain the quality of its reporting and articles to the extent that people will still want to pay the price to access the website? The Times may eventually find itself caught in a Catch-22, as it finds that internet pay walls still aren’t profitable enough to sustain the kind of content worth paying for.

After Katrina: The Fall of the Times-Picayune in New Orleans

Although the Times’ situation still poses many difficulties, it still has national exposure and a wealthy core audience willing to pay for content online. Not so the New OrleansTimes-Picayune, which has earned the dubious distinction of being the first newspaper with a monopoly over a major city to not have seven-day delivery. The paper’s current owners plan to transition to a Web-based presence, however, New Orleans is a very poor metropolitan area and lost many wealthier residents after Hurricane Katrina. In short, New Orleans is a market where many residents don’t have access to broadband Internet. It is unlikely that a pay wall would ever work for the Times-Picayune, simply because the number of readers who have access to the Internet anyway is inherently limited, and limiting the size even further would make its Web presence marginal.

Final Thoughts

The transition of many newspapers and magazines to pay wall websites has been hailed as a great achievement by some observers who believed that the trend to pay walls would make newspapers profitable once again. However, pay walls face many issues depending on the publication, ranging from whether the content is unique enough to support a pay wall, whether pay walls can generate enough revenue to support quality reporting, and whether a Web-based presence can adequately serve a particular community. Pay walls may provide some papers a better opportunity to adjust to the changing media landscape, but they are not a panacea for all the publishing industry’s woes.